Balance Sheet

What is a balance sheet?

A balance sheet is a snapshot of your business's financial position on a specific date. It lists everything you own (assets), everything you owe (liabilities), and what's left over for you as the owner (equity). The name comes from the fundamental equation: Assets = Liabilities + Equity—the two sides must always balance.

Think of it as a financial photograph showing your business's net worth at that moment.

Balance sheet components

Every balance sheet has three sections:

• Assets — What you own: cash, accounts receivable, equipment, vehicles, property
• Liabilities — What you owe: accounts payable, loans, credit card balances
• Equity — Your ownership stake: assets minus liabilities

Reading a balance sheet

A healthy balance sheet shows more assets than liabilities, meaning positive equity. Compare balance sheets over time to see if your business is building value or accumulating debt. Banks and lenders often request balance sheets when you apply for financing.